22 October 2020
Thanks to the efforts of over 100 shareholders, all of Whitehaven Coal’s investors were today forced to consider the case for the company to demonstrate how it will wind down coal operations in line with the climate goals of the Paris Agreement.
However, breaking from norms around shareholder democracy and transparency, Whitehaven did not offer shareholders attending today’s virtual AGM the opportunity to ask questions at the point at which this proposal was put to a vote.
The company also failed to publish the voting results for the coal wind-up resolution during the meeting, despite most of its investors having already voted prior to the meeting. These results were released later in the day, showing 4% of Whitehaven’s shareholders supported the world-first proposal.
Many large investors, including Blackrock, have already voted with their feet, demonstrating opposition to Whitehaven’s future business plans by reducing their investment exposure. Three of Australia’s largest super funds have moved to completely exclude investment in Whitehaven so far this year, while the moves of some of Australia’s big banks out of coal has caused Whitehaven to increasingly look to China and Japan for its debt finance.
For any investors that remain exposed to Whitehaven, today’s resolution provided an opportunity to protect the climate, preserve capital and support workers of this company, which has chosen to not particulate in the decarbonised economy.
“There is no place for a pure play coal company like Whitehaven in a Paris-aligned energy transition. By failing to plan for its own decline, Whitehaven Coal is risking massive wealth destruction for its investors and social instability for its workforce.”
“Without wholesale changes to Whitehaven Coal’s plans, shareholders risk seeing billions of dollars of their capital wasted on new coal mining projects that have no market in a decarbonised economy.”Market Forces Executive Director Julien Vincent
Banking on climate catastrophe
Whitehaven Coal’s business strategy is incompatible with limiting global warming in line with the Paris Agreement’s climate goals.
Climate Analytics shows that, in order to meet the Paris goals, coal power must be phased-out globally by 2040, and fall 80% below 2010 levels by 2030. The Paris-aligned coal phase-out dates for Whitehaven’s key export markets are:
- Japan (50% of FY19 revenue): 2030
- Korea (14% of FY19 revenue): 2030
- Non-OECD Asia (32% of FY19 revenue): 2037
In this scenario, 64% of Whitehaven’s current thermal coal market would disappear by 2030, and over 96% by 2037.
In stark contrast, Whitehaven plans to almost double production between now and 2030, at a cost of around $2 billion, with some projects projected to run into the 2050s. These plans mean Whitehaven intends to produce around 500 million tons of coal that could not be sold into its current markets, based on Paris-aligned coal power phase out dates for those markets.
Whitehaven Coal’s hopes for sustaining and expanding its operations rely on Asian coal power demand dramatically increasing. However, the pipeline of proposed new coal power stations in Southeast Asia has halved from 2015 to 2019, while construction starts fell 85% from 2016 to 2019. Japan plans to close around 100 of its 140 coal-fired power plants by 2030. Korea is phasing out domestic and overseas coal financing. Vietnam’s latest Power Development Plan will see half of the country’s planned coal power plant capacity cancelled or shelved. Bangladesh is reviewing 26 of its 29 planned coal plants, stating the country’s intention to “move from coal-based power.”
Concerningly, investors and influential proxy advisors failed to account for these policy shifts in Whitehaven’s export markets when considering the shareholder proposal.
Shareholders attending today’s AGM challenged Whitehaven’s rosy view of future coal demand.
Whitehaven’s FY20 Sustainability Report claims the company’s future remains robust over the long term under all of last year’s International Energy Agency World Energy Outlook scenarios (Current Policies, STEPS and SDS), and the risk of Whitehaven’s mines being stranded in a carbon-constrained world is low.
Chairman Mark Vaile was asked how these claims would be impacted by the latest IEA SDS scenario, which projects 11% lower coal production in 2030, compared to the 2019 SDS, and by the IEA’s new net-zero scenario, where coal demand in 2030 is 55% lower than STEPS.
There is insufficient disclosure of assumptions and modelling for shareholders to be able to run this type of sensitivity analysis themselves, but the Board would be expected to know and understand these assumptions in order to sign off on the Sustainability Report.
However, neither Mr Vaile nor Managing Director Paul Flynn provided any response as to the sensitivity of the company’s claims to these lower demand forecasts.
It was also revealed that the company’s proposed expansion projects were not assessed in the company’s climate scenario modelling. While Mr Flynn confirmed these projects would be stress tested at the final investment decision stage, this will not include testing against a net-zero 2050 scenario.
Terrible environmental record
Many shareholder questions at today’s AGM focused on Whitehaven’s terrible record of environmental damage and degradation, which has been so poor that the company has moved to tie some of Mr Flynn’s bonus payment to environmental performance.
Shareholders highlighted current prosecutions facing the company, including alleged illegal tree clearing at Narrabri Underground, surface water theft at Maules Creek mine, and the non fulfilment of biodiversity offsets.
One shareholder asked about the community and environmental impacts of Whitehaven’s massive proposed Vickery coal mine:
“The Annual Report talks about a community and social compact, but during the public hearing for the Vickery coal project, people from the local community, some in tears, spoke of the poor record of the company in the district. Narrabri Council, usually supportive of the mining industry, objected to the project, raising issues of social dislocation, inter-generational equity and competition for water. Has the CEO been honest with shareholders about the company’s reputation and standing in the community where it operates and won’t proceeding with the Vickery project, against the wishes of that community, only worsen this standing?”